Security and Competition: Economic Reasoning for A New Global Paradigm

Dr. Panagiotis Palaios is Assistant Professor of Economics at Deree–The American College of Greece. He holds degrees in Economics and International Relations from the Corps Officers Military School (SSAS), Aristotle University of Thessaloniki, Panteion University, and the National and Kapodistrian University of Athens, where he completed his MPhil and Ph.D. in Economics.

His research focuses on the political economy of security, with particular emphasis on the alliance cohesion, public choice and defense policy. A secondary stream explores maritime economics. His work has appeared in journals such as Defence and Peace Economics, Scottish Journal of Political Economy, Peace Economics, Peace Science and Public Policy, and Maritime Policy and Management.

He teaches Economics of Conflict and Security, Microeconomics, and Macroeconomics, and has previously taught at the National School of Public Administration and Harokopio University of Athens. A former Lieutenant Commander in the Hellenic Navy, he served as Head Economic Advisor to the Deputy Minister of National Defense from 2019 to 2022.

This interview has been authorised for publication by Dr. Panagiotis Palaios.

We thank you, Dr. Panagiotis Palaios for accepting our interview with the Saint Pierre International Security Center.

SPCIS: How does the political economy lens help us better understand contemporary global security challenges?

Dr. Panagiotis Palaios: Security is not simply the absence of war or violence. It is a system of choices, trade-offs, and incentives. The political economy lens helps us understand who makes these choices and under what constraints. It brings structure to complexity, revealing not only the power struggles among states but the competing interests within them. In the tradition of Thomas Schelling, I see security as a form of bargaining, not only between adversaries, but also among allies, bureaucracies, and voters. Decisions about deterrence, arms procurement, or alliance participation are rarely “strategic” in the narrow military sense. They are the product of political pressures, budgetary limits, and interdependent payoffs. A political economy approach compels us to ask: What are the incentives? Who bears the cost? And how can institutions align behavior with collective outcomes? For instance, climate change and pandemics are not just environmental or health issues. They challenge the distribution of security across the major actors of the international system. In this sense, security becomes a problem of institutional design, where the real danger often lies not in adversarial players, but in the misalignment of incentives. This lens also allows us to see the emerging multipolar world in a new light. From an economic standpoint, great powers can be viewed as producers of security, while states and their voters are the consumers. In a unipolar or bipolar system, the supply of security is more concentrated, with quasi-monopolistic characteristics. But as more actors enter the system, as we shift toward multipolarity, competition among security providers intensifies. Just as in microeconomic theory, this diffusion of power can reduce inefficiencies and lead to a more balanced distribution of influence among the suppliers of security. Under the right institutional conditions, a more competitive security environment can yield a more efficient global equilibrium. One in which social welfare is higher and states have greater bargaining autonomy. In short, political economy not only helps us interpret today’s challenges. It equips us to rethink the architecture of global order itself.

SPCIS:  In your opinion, how do economic interests shape national and international security strategies?

Dr. Panagiotis Palaios: All security policy has an economic logic. Not just in its costs, but in its political foundation. As Mancur Olson taught us, collective action problems plague even the strongest alliances. Defense is a public good. Therefore, the temptation to free ride is ever-present. This is why economic interdependence, in the form of trade, investment or even shared industries, often plays a stabilizing role in alliance cohesion. Consider NATO. Beneath the formal commitments lies a web of economic relationships consisting of military-industrial ties, fiscal transfers, and trade asymmetries. Countries deeply integrated with the U.S. economy, or benefiting from joint defense production, tend to align more closely with the US strategic preferences. My own research on NATO shows that cohesion is not only a matter of shared threats or ideology. Mainly it reflects who is invested in whom. Even outside alliances, economic interests shape the menu of available security tools. Sanctions, export controls and tech restrictions. These are weapons with economic triggers and political aims. Increasingly, national security is defined by supply chain resilience, industrial autonomy, and control over intangible assets like data and algorithms. What was once foreign economic policy is now at the heart of grand strategy.

SPCIS: What role do private actors and markets play in shaping today’s security architectures?

Dr. Panagiotis Palaios: The traditional view that security is the exclusive domain of the state is no longer sustainable. Markets, firms, and private actors are deeply embedded in the provision and even the definition of security. First, consider the role of private defense contractors, cybersecurity firms, or logistics providers. These actors are not just suppliers. They shape priorities, influence doctrine, and sometimes determine operational capacity. Their incentives, as profit maximizers, may not always align with public goals, yet states increasingly depend on them. Second, financial markets are now tools and targets of strategic competition. Stock markets react to geopolitical risk, shaping political behavior. Central banks coordinate sanctions. Investment flows become indicators of trust or pressure. In effect, confidence becomes a form of deterrence, and market access a form of leverage. Third, digital platforms and data firms hold unprecedented informational power. Who controls the data, the infrastructure, the algorithms? These are now security questions. Private actors like Google, TikTok, or Palantir operate in spaces where sovereignty is blurred and their decisions on access, privacy, or AI deployment can have global ramifications. Overall, the architecture of security today is partly public and partly private. Understanding the incentives and constraints of non-state actors is no longer optional. It is foundational. The path is clear. We need more economic reasoning to explain today’s security architecture.

SPCIS: Do you see any shifts in the global security economy due to recent technological or geopolitical changes?  

Dr. Panagiotis Palaios: Of course. We are in the midst of a structural transformation, shaped by three key shifts. First, technological rivalry has become systemic. The competition between the U.S. and China is not merely about arms or territory. It is about platforms, standards, and supply chains. Semiconductors, AI, and quantum technologies are dual-use by nature. Their diffusion shapes both economic capacity and strategic leverage. Second, we are witnessing a re-nationalization of security production. Not as a return to state ownership, but as a shift toward strategic control. The COVID-19 pandemic, the war in Ukraine, and maritime disruptions revealed the fragility of global supply chains. In response, states are prioritizing autonomy in critical sectors. Third, non-traditional threats are altering the map of responsibility. Climate shocks, cyberattacks, and global health risks do not respect borders or deterrence postures. They require coordination, resilience, and often redistribution. Security, in this context, becomes an issue of economic justice. Who adapts? Who absorbs the shock? Who governs the commons? What we are seeing is not the militarization of the economy, but the economicization of security. The boundary between guns and butter has collapsed. The challenge now is to design institutions and policies that reflect this fusion. We need to align incentives in ways that sustain stability, transparency, and surplus-maximizing competition among security providers in an increasingly multipolar world.